Recently we sent members of our Creators’ Legal Program an in-depth email about proactive law. Proactive law is the opposite of reactive law; the reason why it is important is because by being proactive, you can actually avoid expensive legal problems before they happen. Just like getting a regular checkup is cheaper and less involved than going in for surgery, approaching legal problems proactively is better than waiting for a dispute.
What Is Proactive Law?
One of the tenets of our Creators’ Legal Program (and subscription based law firms, generally) is that it is easier, cheaper and faster to be proactive about legal issues (meaning that you get in and address the problems early or even before they happen) instead of being reactive about legal issues (meaning that you react once a legal problem has begun).
Below are some examples of what proactive law looks like in practice.
Trademarks
Reactive: “I used an online service to file a trademark, it got screwed up and now because someone is threatening to sue me, I have to change my name and brand.”
Proactive: “I hired a trademark attorney to run a trademark search and file a trademark application.”
BONUS: I thought ahead about international brand protection.
Business Formation
Reactive: “We filed our LLC by ourselves and never got around to drafting any kind of operating agreement. Now one of my partners is suing the rest of us because he thinks he owns a majority of the company that we built together.”
Proactive: “I used an attorney to work through the main issues that me and my business partners might face. When we had our first potential disagreement we were able to easily work it out by looking at our operating agreement.”
Contracts
Reactive: “I did a bunch of work for my client and they are using it even now. But they never paid me and owe me more than $10,000 and are not responding to my calls or emails.”
Proactive: “I have a professional service agreement tailored to my business, so my clients are clear on when to pay me and how we are going to work together. This leads to fewer disputes and less time chasing money. Also, the license terms are clear.”
Disputes
Reactive: “A few months ago, I started to have a falling out with my business partner. We had been writing angry emails to each other for weeks – and then just the other day I got a court summons saying that she is suing me.”
Proactive: “I called my lawyer and they gave me some options on how to figure out a misunderstanding that I am having with a business partner. I chose one and we were able to resolve our differences and move on with our lives.”
Why Is Proactive Law Important for Creative Businesses?
In all of the examples given above, the reactive approach to law is one or two orders of magnitude more expensive than the proactive approach. You can think of difference in price as the difference between going for a regular checkup versus going to surgery or the emergency room to deal with health problems. So the bottom line is simple: if you want to keep legal costs under control, think ahead!
Many people tend to think of working with a lawyer as something that you do when a problem comes up. However, smart business owners consult with a lawyer early as a means of avoiding major legal trouble down the road. That’s because they know that it will take less stress, time and money to be proactive.
We developed the Creators’ Legal Program as a tool for creative businesses of all sizes to take a proactive approach to their legal issues. Our hope is that by working with an attorney early, business owners and entrepreneurs can avoid common legal pitfalls and build a strong foundation.
And if you have questions about the Creators’ Legal Program – give us a call to get them answered and get your first month free.
Will you go proactive or reactive in your business? Hint: one is better for the bottom line.
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